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Issue 86

Copyright 2011-2012 All Rights Reserved.

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7th Round of Cooling Measures The Anvil to Smash the Camels Back? Singapore Property News This Week Resale Property Transactions (December 26 December 31)



Welcome to the 86th edition of the Singapore Property Weekly. Hope you like it! Mr. Propwise

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7th Round of Cooling Measures The Anvil to Smash the Camels Back?

By Mr. Propwise
As I had discussed previously, skyrocketing residential and industrial property prices dramatically increased the risk of additional government measures to prevent a destabilizing property bubble from forming. And this time, no punches were pulled. On 11 January 2013 the Ministry of Finance, Ministry of National Development, Monetary Authority of Singapore and Ministry of Trade & Industry issued a joint press release to announce a large slew of measures, aiming to break the back of the stubbornly bubbling market.

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SINGAPORE PROPERTY WEEKLY Issue 86 Summary of the latest round of measures One of the distinctive features of this round is the sheer quantity of measures announced, with a broad reach covering public housing, private residential and industrial property, and targeting the supply, demand, financing and taxation of property. While theres been tons of media coverage of the measures, Ive not seen a succinct and easy-to-read yet detailed summary of the measures, so heres my attempt to capture everythings that been announced. Effective 12 January 2013: Private Residential Property Measures 1. The Additional Buyers Stamp Duty (ABSD) will be raised by 5% to 7% and will be imposed on Permanent Residents (PRs) purchasing their first and Singaporeans
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purchasing their second residential property: i. Singaporeans will pay 0%/7%/10% of ABSD on the first/second/third property onwards respectively ii. PRs will pay 5%/10% ABSD on the first/second property onwards respectively iii. Foreigners and non-individuals (companies) will pay 15% ABSD from the first property onwards 2. The Loan-to-Valuation (LTV) on housing loans will be reduced for non-individuals and individuals with at least one mortgage:

i. For individuals obtaining their second mortgage, the LTV is lowered to 50% or 30% if the loan is longer than 30 years or extends beyond 65 years of age of the borrower
ii. For individuals obtaining their third or greater mortgage, the LTV is lowered to 40%
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SINGAPORE PROPERTY WEEKLY Issue 86 or 20% if the loan is longer than 30 years or extends beyond 65 years of age of the borrower iii. For non-individual borrowers, the LTV is lowered to 20% 3. The minimum cash downpayment for individuals applying for the second or subsequent loan is raised from 10% to 25% Executive Condominium (EC) Measures 1. The maximum strata floor area will be capped at 160 square meters

2. New dual-key ECs will only be sold to multi-generational families

3. Government Land Sales (GLS) EC sites can only be launched for sale 15 months from the date of award or after completion of foundation works, whichever is earlier 4. Private enclosed spaces and private roof terraces will be counted as bonus GFA and subject to extra charges Industrial Property Measures 1. Seller's Stamp Duty (SSD) will be imposed on industrial properties and land sold within three years from date of purchase: 15%/10%/5% for first, second and third year respectively
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Public Housing Measures

1. The Mortgage Servicing Ratio (MSR) will be reduced to 30% for bank loans and 35% for HDB loans 2. PRs who own HDB flats cannot sublet their whole flat 3. PRs who buy a private property will have to sell their HDB flat within 6 months even if they have fulfilled the Minimum Occupation Period (MOP)

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SINGAPORE PROPERTY WEEKLY Issue 86 What is the government thinking? You can sense a level of frustration in the Government over the property market despite multiple rounds of cooling measures since September 2009 to moderate housing price increases, property prices have stubbornly climbed upward, albeit in a generally decelerating speed, until the pickup in the last few quarters. This seventh round of measures represents their most serious (desperate?) attempt to throw as many darts as they can to burst any sector that looks bubbly. Ironically, theres little they can do to treat the fundamental cause of the rise in property prices sustained extraordinarily low interest rates, and the expectation that they will remain low for the foreseeable future. As Singapore has chosen to keep an open capital market and manage its exchange rate
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(in a dirty float system), it has to give up control over its monetary policy (part of the impossible trinity of Economics) in other words, interest rates in Singapore are dependent on global monetary conditions, and theres not much the Government can do to control it. So they can only put together a package of administrative measures to discourage property ownership for investment, keep foreign buyers out with punitive taxes, cap borrowing limits, and curb excesses in the market especially in public housing (e.g. from the uproar created over a $2 million 4,300 square feet public housing penthouse). Impact of this round of measures on the property market In my opinion, the most potent measure in this round is the implementation of ABSD for
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SINGAPORE PROPERTY WEEKLY Issue 86 Singaporeans buying second homes (7% for the second home and 10% for the third and subsequent one) and for PRs buying their first home (5% for the first home and 10% for the second home and beyond). This will basically kill investment demand for residential property by Singaporeans and curb end user demand by PRs. As an investment vehicle, residential property will make much less sense. With the implementation of the measures, a Singaporean looking at buying a second home will have to pay close to 10% in stamp duties! But given the low interest rate environment and the negative real interest rates if you leave your money in fixed deposits, investment demand will likely flow to other assets with good yields, such as commercial property (e.g. retail shops and office units) and high dividend equities such
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as REITs. For PRs and foreigners, the buy or rent equation will shift markedly towards renting and thus rental demand could strengthen. This will partially ameliorate concerns over who will be renting the large supply of completed properties coming onto the market in the next few years. For foreigners, the hike in the ABSD to 15% will no longer make buying Singapore property relatively more attractive than Hong Kong, thus preventing the further inflow of hot money. Will property prices fall in 2013?

Overall, I believe that the marginal demand for property will fall significantly, leading to a drying up of liquidity in the market and a fall in the number of property transactions this year. Note that this does not mean that property prices will fall.
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SINGAPORE PROPERTY WEEKLY Issue 86 Rather, the bid-ask spread between what property sellers want for their property and what property buyers are willing to pay (especially after imputing the increased taxes) will widen, leading to fewer transactions being closed. Unless you are specializing in rentals, it could be a tough year to be a property agent. For Singapore property prices to fall, I believe well need to see some sort of external shock (what I call a black swan, using Nassim Talebs terminology) that will lead to an increase in interest rates and/or unemployment rates. The cause could be anything from rising inflation rates, to a recession, to an epidemic. Only then will see forced sellers and blood on the street. By Mr. Propwise, a Chartered Financial Analyst and resident expert at, a site to help property owners and investors make profitable decisions in uncertain times.

A significant fall in volumes due to the severity of the seventh round of measures could cause significant market disruptions. The Government is aware of this, and have hedged themselves by calling the current round of measures temporary, giving them the leeway to lift these measures if market conditions deteriorate significantly.

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Singapore Property This Week

Guidelines on private enclosed space to be reviewed Following recent reports of super-sized EC units being sold to buyers not from the sandwiched class the ECs are meant to cater to, URA had been directed review guidelines on private roof terraces and private enclosed space on ground floors. These spaces which are open to the sky are not considered part of the GFA has no development charges to encourage developers to build more private or communal open spaces for residents to enjoy. They are the reason why penthouses units can be sold at much lower psf prices than smaller typical units since the entire
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space of the unit (including the open space) is included in the pricing. The resulting high price of the units may not be affordable for the class ECs are targeting and buyers who can afford these units may not even need the subsidies. Furthermore, as more developers sell off the open space, there will be less communal space for all residents and buyers of units with these open spaces may not covered them up or enclose them in the future. (Source: Business Times) Over 75% of Echelons units sold 390 units of the 99-year 508-unit private condominium project next to Redhill MRT at Alexandra View have been sold.
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SINGAPORE PROPERTY WEEKLY Issue 86 Over 200 of these units were sold at its preview at an average selling price of $1,700 psf. The price will increase by 2% and 4% subsequently for future releases. 80% of the buyers were Singaporeans, with the remaining being PRs and foreigners. The 43storey, twin-tower development houses one to four-bedroom apartments and four penthouses. (Source: Business Times) Freehold Hampton Court at Draycott sold All 12 units in the four-storey Hampton Court (located at the corner of Draycott Park and Draycott Drive) were said to be sold to Swire Properties at $155 million or $2,526 psf ppr including a $22.3 million development charge, breaking the previous record of $2,525 psf ppr. The 33,425 sq ft freehold site has a 2.1 plot ratio and can be built up to 24 storeys. It
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can potentially be redeveloped into a project with 33 2,000 sq ft apartments. (Source: Business Times)

Possible measures to hit various property markets

Following recent reports of super-sized EC units being sold to buyers not from the sandwiched class the ECs are meant to cater to, URA had been directed review guidelines on private roof terraces and private enclosed space on ground floors. This may lead to additional development charges if private roof terraces and enclosed spaces are included under the GFA. There may also be additional measures introduced in the resale flat market especially since the increase in prices of mass market homes can be attributed to the high HDB resale prices. Upgraders may have to sell their flats before purchasing private
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SINGAPORE PROPERTY WEEKLY Issue 86 property, or have restrictions placed on them. On the commercial end, there could also be seller stamp duties to discourage investment demand, and strengthen enforcement against unauthorised use of industrial spaces and an extension of guidelines regarding strata division of certain sites sold under the industrial GLS to private sites. (Source: Business Times) Freehold Villa Des Flores back on the market for the third time The 41-unit condominium (13 townhouses and 28 apartments) at Whitley Road is back on the market for the third time with an unchanged asking price of $160-165 million or $1,533-1,581 psf. The development sits on a 104,370 sq ft which can be redeveloped into two-storey mixed landed housing of detached, semi-detached, terrace housing or
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a combination, based on conventional housing types or as a cluster housing development. The tender closes on Jan 30 at 3pm. (Source: Business Times) Slew of cooling measures to hit property markets (effective 12 Jan); both short and long term

The temporary measures include an increase in ABSD rates, lower LTV ratios and increase in minimum downpayment while the permanent measures include a maximum EC unit size, restrictions on PRs subletting flats and disallowing PRs to retain HDB flats after buying private property.
The ABSD now applies to the second home purchase of Singaporeans at a rate of 7%, and the ABSD for their third and subsequent home purchase has been increased
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SINGAPORE PROPERTY WEEKLY Issue 86 to 10% from 3%. Similarly, PRs now have to pay a 5% ABSD and the rates for the second and subsequent purchase has increased from 3% to 10%. The ABSD for non-PR foreigner and corporate purchases has also been increased from 10% to 15%. Buyers whose options were granted before January 12 and exercised them by Feb 1without any extension of the option validity period can apply for remission so that they only need pay the old rates. The LTV ratios will also be lowered by 10% and 20% for second housing loans and third and subsequent housing loans respectively for individuals with at least one outstanding loan and companies. The minimum cash downpayment for the second or subsequent home mortgages has also increased from 10% to 25%. The LTV limit for non-individual borrowers was also lowered from 40% to 20%. ECs now have a maximum unit size of 160 sq
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m (1,722 sq ft) and the formerly free private enclosed spaces and private roof terraces will now be included in the 10% bonus GFA for all non-landed residential developments including ECs and private condos, and be subject to development charges. The latter will also be included under the maximum GFA for strata commercial and industrial projects. Eligibility for HDB loans has also been tightened, in addition to stipulating that PRs who purchase private housing must sell their HDB flats within six months of the purchase and that PR owners of HDB flats are not allowed to sublet the entire flat.

(Source: Business Times)

New cooling measures to affect mainly HDBs and Ecs With the restriction on the maximum unit size of ECs to 160 sq m (1,722 sq ft), there will unlikely be record high prices of $2.05 million
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SINGAPORE PROPERTY WEEKLY Issue 86 ECs in the future, with most costing under $1.2 million, based on an average price of $700 psf. In addition, the previously free private roof terraces and private enclosed spaces will now be considered under the 10% bonus GFA for all non-landed residential developments including ECs, and hence subject to development charges. Other new measures affecting ECs include the restriction of dual-key EC units to multi-generational families and the stipulation that developers can only launch the development for sale 15 months after the site is awarded or after the completion of foundation works. had not obtained their HDB approval before January 12. PRs who purchase a private property on Jaunary 12 or after must also sell their HDB flats within six months of the purchase. This will likely result in increase in resale HDB flats. In addition, from July 1, there will be tighter terms in relation to HDB loans and the use of CPF savings to purchase flats with fewer than 60 years' lease left. (Source: Business Times) Resale prices of private homes saw 6.6% increase in Q4

For HDBs, the Mortgage Servicing Ratios (MSRs) for housing loans is lowered to 35% and 30% of the borrowers income for loans from HDB and financial institutions respectively. PR owners of HDB flats are also not allowed to sublet their entire flats if they
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The average resale price of private homes hit $1,233 psf in Q4 2012, a 6.6% increase from $1,157 psf in Q3, bringing the year-on-year increase to 13.4% in 2012, compared to 10.4% in 2011. Specifically, resale prices rose 4.8%, 4.6% and 3.6% in the OCR, CCR and
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SINGAPORE PROPERTY WEEKLY Issue 86 RCR respectively. Transaction volume, however, fell by 5.5% in Q4 from Q3 and also fell by 7% from 2011 to around 12,500 private non-landed homes in 2012. Rents fell 1% to $3.91 psf in Q4 from Q3, resulting in a smaller rental yield of 3.8% in Q4 compared to 4.1% in Q3. Growth in resale prices are expected to increase by 5% at most in 2013, given the increase in supply in the primary market, which will also possibly lead to a fall in prices and rents. Sales volumes are also likely to fall, given the economic conditions and possible new cooling measures. Meanwhile, the median COV for HDB resale flats increased by $4,000 to $34,000 in Q4 2012, resulting in a 1.1% increase of the median price of HDB resale to $455,000 in the same period. Median rents remained at $2,400 per month. (Source: Business Times) Commercial 99-year leasehold Mohd conservation shophouse for sale Sultan

The three-storey-plus attic shophouse at 15 Mohamed Sultan Road is asking for $15.5 million or $2,259 psf based on its 6,862 sq ft GFA. The 2,606 sq ft site zoned for residential use with commercial on the first storey has a 3.8 plot ratio. This allows for potentially 3,000 sq ft more GFA at the back of the building, bringing the height of the building to five storeys. The site is located near the River Valley Road, the Singapore River and the upcoming Fort Canning MRT Station. The tender will close on Feb 20.

(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 86 Strata factories transactions made in 2012 mostly profitable There were 1,136 secondary-market transactions involving resales and subsales of 60-year strata factory units, of which only 618 had caveats of previous transactions that can be found. 60% of these 618 units were last transacted in 2010 or 2011, with another 5.8% last transacted in 2012. 99.7% of these transactions were profitable, with only two transactions involving units last bought in 2011 being a loss. The average profit made was 47% or $262,636, with the 73 units last bought in 2007 making an average of 85% or $406,160, the units bought in 2009 gaining 64% or $366,208, the 177 units bought in 2011 gaining 27% or $166,795 and the 36 units bought and sold last year gaining 15% or $86,797. The total sales volume of both primary and secondary market will likely be lesser than 2011s 5,183, with 4,392 caveats lodged and 4,700 predicted for the year of 2012. Prices for 60-year upper storey factory and warehouse units rose 3.3% to $451 psf in Q4 2012 from Q3, bringing the full-year price increase to 13%, compared to the 26% in 2011. However, the rental market did better, with 5,924 rental deals transacted in the first 11 months of 2012, compared to the 5,575 deals in 2011. Monthly average rents for upper-storey factory and warehouse units and high-tech units hit $2 psf and $3 psf respectively in Q4 2012. There is around 27 million sq ft GFA of upcoming industrial space in 2013. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 86 SSD for industrial properties sold within 3 years introduced To control the increasing prices of industrial properties, a SSD of 15%, 10%, and 5% will be imposed respectively on properties sold within the first, second, and third year of purchase with effect from Jan 12. There has been diversion to the industrial property market following the introduction of cooling measures in the residential sector, which had led to an increase in resale transactions of multiple-user factory space within three years of an earlier purchase to 15% and 18% respectively in 2011 and the first 11 months of 2012 from a 10% average from 2006 to 2010. (Source: Business Times)

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Non-Landed Residential Resale Property Transactions for the Week of Dec 26 Dec 31
Postal District 1 4 5 5 7 8 9 9 9 9 9 9 9 9 9 10 10 10 10 10 10 10 10 11 11 Project Name THE SAIL @ MARINA BAY REFLECTIONS AT KEPPEL BAY DOVER PARKVIEW THE INFINITI TEXTILE CENTRE CITYLIGHTS THE ORCHARD RESIDENCES VIDA RIVERGATE SCOTTS 28 ROBERTSON EDGE ONE OXLEY RISE TRIBECA ASPEN HEIGHTS WATERMARK ROBERTSON QUAY ARDMORE II GRANGE RESIDENCES DRAYCOTT EIGHT CUSCADEN RESIDENCES GALLOP GREEN QUINTERRA GISBORNE LIGHT THE SIERRA SKY@ELEVEN NINETEEN SHELFORD ROAD Area Transacted Price Tenure (sqft) Price ($) ($ psf) 861 2,080,000 2,415 99 1,744 4,300,000 2,466 99 936 1,180,000 1,260 99 1,238 1,268,000 1,024 FH 1,163 965,000 830 99 560 1,000,000 1,787 99 1,808 5,990,000 3,312 99 527 1,260,000 2,389 FH 1,033 2,375,000 2,298 FH 1,098 2,430,000 2,213 FH 474 955,000 2,016 999 732 1,450,000 1,981 FH 1,905 3,600,000 1,890 FH 1,324 2,100,000 1,586 999 1,830 2,680,000 1,465 FH 2,024 5,750,000 2,841 FH 2,669 7,580,000 2,840 FH 2,895 7,180,000 2,480 99 1,442 3,250,000 2,253 FH 3,272 6,478,560 1,980 FH 1,389 1,850,000 1,332 99 1,249 1,580,000 1,265 FH 1,033 1,300,000 1,258 947 1,851 3,000,000 1,620 FH 980 1,360,000 1,388 FH Postal District 11 12 12 12 13 13 13 13 14 14 14 15 15 15 15 15 15 15 16 16 16 16 16 17 17 Project Name KHEAM HOCK GARDENS PRESTIGE HEIGHTS OLEANDER TOWERS AVA TOWERS AVON PARK BLOSSOMS @ WOODLEIGH SENNETT ESTATE THE ACACIAS D'OASIA CASSIA VIEW CASA SARINA ONE AMBER THE MAKENA THE TREELINE TANJONG RIA CONDOMINIUM SERAYA 9 LAGUNA PARK MALVERN SPRINGS COSTA DEL SOL SUNHAVEN BAYSHORE PARK THE CLEARWATER CASAFINA DAHLIA PARK CONDOMINIUM CHANGI GARDEN Area Transacted Price Tenure (sqft) Price ($) ($ psf) 1,356 1,850,000 1,364 FH 581 980,000 1,686 FH 1,152 1,388,000 1,205 99 1,227 1,355,000 1,104 FH 1,281 1,770,000 1,382 FH 1,410 1,780,000 1,262 FH 829 1,000,000 1,207 FH 1,216 1,438,000 1,182 FH 538 827,000 1,537 FH 1,206 1,260,000 1,045 FH 1,270 1,250,000 984 FH 1,302 1,850,000 1,420 FH 1,152 1,575,000 1,367 FH 926 1,165,000 1,259 FH 1,378 1,650,000 1,198 99 797 925,000 1,161 FH 1,615 1,500,000 929 99 2,099 1,880,000 896 FH 1,345 1,798,000 1,336 99 1,259 1,330,000 1,056 FH 936 938,000 1,002 99 980 954,000 974 99 1,302 1,200,000 921 99 1,292 1,230,000 952 FH 1,399 995,000 711 FH

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Postal District 18 18 18 19 19 19 19 19 19 20 21 21 21 21 23 23 23 23 23 23 23 28 Project Name MODENA OASIS @ ELIAS MELVILLE PARK SUNSHINE GROVE KOVANA CHERRY GARDENS CHILTERN PARK THE QUARTZ REGENTVILLE FAR HORIZON GARDENS SUMMERHILL ASTOR GREEN SYMPHONY HEIGHTS CLEMENTI PARK THE JADE HILLVIEW REGENCY GUILIN VIEW HILLVIEW RESIDENCE GUILIN VIEW THE WARREN PALM GARDENS SELETAR SPRINGS CONDOMINIUM Area Transacted Price Tenure (sqft) Price ($) ($ psf) 1,561 1,500,000 961 99 1,302 1,240,000 952 99 936 790,000 844 99 1,076 1,155,000 1,073 FH 1,184 1,250,000 1,056 FH 1,066 1,060,000 995 99 1,475 1,350,000 915 99 1,507 1,292,400 858 99 1,076 880,000 818 99 3,907 2,100,000 537 99 947 1,140,000 1,204 FH 1,066 1,210,000 1,135 99 990 1,100,000 1,111 FH 1,539 1,550,000 1,007 FH 1,087 1,168,000 1,074 99 1,195 1,155,000 967 99 861 825,000 958 99 1,259 1,200,000 953 999 1,259 1,080,000 858 99 1,238 1,020,000 824 99 1,216 933,000 767 99 1,335 1,065,000 798 99

NOTE: This data only covers non-landed residential resale property transactions with caveats lodged with the Singapore Land Authority. Typically, caveats are lodged at least 2-3 weeks after a purchaser signs an OTP, hence the lagged nature of the data.

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